Can Circle’s IPO boost USDC in its fight for market share?

Circle filed for an initial public offering (IPO) on Jan. 11 with the US Securities and Exchange Commission (SEC). Because the firm is the issuer of the second-largest stablecoin by market cap, the USD Coin (USDC), it is important to figure out how this move might affect USDC’s role in the market.

Analyzing the stablecoin market in a one-year time frame, a significant loss in market share can be seen in USDC. The stablecoin issued by Circle showed a $42.7 billion market cap on January 30 which dwindled to $26.4 billion at the time of writing, representing a 38% loss.

Meanwhile, USDC’s competitor Tether USD (USDT), boasts a $96.1 billion market cap, four times the market share shown by Circle’s stablecoin. If the IPO filed by Circle could give USDC a boost, now is a good time for that.

Regulatory landscape

Before analyzing how Circle’s new foray might impact its stablecoin’s reliability in front of retail and institutional investors, it is important to assess the US regulatory landscape. Lawyer and Fireblocks advisor Nicole Dyskant explains that, at both Federal and State levels, crypto is still a theme circulated by uncertainty.

“There is uncertainty in the classification of digital assets, exchanges, and custodians, including the competent authority to regulate the theme, SEC or CFTC [Commodity Futures Trading Commission]. (SEC vs. CFTC). Although some relevant bills are being considered in the country, including bipartisan ones, led by Congress members from both US parties, such bills have not been voted on,” explains Dyskant.

Therefore, from a regulatory perspective, it is difficult to forecast how Circle’s IPO could influence USDC. Moreover, SEC’s investigations about PYUSD, PayPal’s stablecoin, being a security or not adds more uncertainty and another layer of difficulty to tell if the market, especially institutions, will be leaning towards using USDC.

Relevant changes

Although Circle’s IPO might not imply a gain in trust among investors for USDC, it may still bring fundamental changes to the market. Dan Yamamura, founding partner at Brazilian asset manager Fuse Capital, highlights that the USDC issuer’s plans to go public can create a benchmark for transparency in the stablecoin market.

“When the company is publicly listed, it needs to show a level of transparency that’s important for a stablecoin issuer. This is the first positive change I see, and it applies to the stablecoin market as a whole,” assesses Yamamura.

Speaking of Circle specifically, Fuse’s founding partner points out that the public listing gives the company a capital injection. As a result, Circle would have more resources to invest in technology and marketing, two key tools to foster USDC growth and make it more competitive against USDT.

Another benchmark, and the last change a successful IPO from Circle could bring according to Yamamura, is a reference point for evaluating publicly listed stablecoin issuers. “It will be beneficial for the stablecoin market to understand how to evaluate those publicly listed issuers,” concludes Fuse’s founding partner.